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Emerging Issues in Management (Mgmt 440). Regulation: Law, Economics and Politics (Chapter 10) Professor Charles H. Smith Fall 2011. Introduction to Government Regulation. Government regulation is an often despised yet often necessary part of American business.
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Emerging Issues in Management (Mgmt 440) Regulation: Law, Economics and Politics (Chapter 10) Professor Charles H. Smith Fall 2011
Introduction to Government Regulation • Government regulation is an often despised yet often necessary part of American business. • On one hand, we see abuses by politicians all the time; on the other hand, a nation without strong leadership leads to chaos, anarchy, violence and a general lack of order.
Introduction to Government Regulation cont. • Federal government regulation draws its authority from • U.S. Constitution; e.g., Article I sets forth the powers of Congress such as the power to regulate interstate commerce and intellectual property or “lay and collect Taxes.” • Statutes; e.g., securities laws confer power on Securities Exchange Commission to regulate securities trading and enforce securities laws. • “The people” vote for our government representatives we hope will work toward our benefit; e.g., President and Congress who, in turn, control who sits on federal bench.
Regulatory Powers Under the U.S. Constitution – Commerce Clause • Commerce Clause (Article I, Section 8) gives Congress the power to “regulate Commerce . . . among the several states.” • This power has been broadly interpreted • Congress empowered to regulate activities that “substantially affect interstate commerce.” • This power not necessarily limited to commerce that crosses state lines; what may seem to be purely interstate commerce may also potentially be regulated.
Commerce Clause cont. • Direct impact – the Commerce Clause has been used to justify federal legislation as to the New Deal in the 1930’s and civil rights laws in the 1960’s. • Indirect impact – there is also substantial “dormant” Commerce Clause jurisprudence which comes into play when state regulation impinges on interstate commerce.
Commerce Clause cont. • Case studies • Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964) – broad scope of Commerce Clause. • Gonzales v. Raich, 545 U.S. 1 (2005) – medical marijuana case. • Granholm v. Heald, 544 U.S. 460 (2005) – state regulation of direct sales by out-of-state winemakers.
Regulatory Powers Under the U.S. Constitution – Taxing Power • Congress has the power to levy taxes under Article I, Section 8; that power extends to income taxes per the 16th Amendment. • Some assert that imposition of income tax is unconstitutional but this has been completely debunked in the courts; arguments include • 16th Amendment improperly enacted. • Only residents of “sovereign” states (D.C., Puerto Rico) required to pay income tax. • Alas, litigants routinely lose these cases resulting in imprisonment, fines or both.
Regulatory Powers Under the U.S. Constitution – Intellectual Property • Intellectual property is commonly regarded as a recent development but it is not. • In fact, it is provided for in Article I, Section 8 – “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries” (1787).
